Brussels is expected this week to unveil the details of its €78bn (£69bn)
rescue for Portugal as it attempts to hammer out a second emergency package
for Greece.

Final terms of the Portuguese deal will be unveiled after the meeting of eurogroup finance ministers on Monday. Portugal is expected to be charged an average loan rate of about 5.5pc – cheaper than Ireland's 5.8pc but more expensive than the Greek level of just over 4pc.

Concerns that debt woes could spread across the eurozone prompted the European single currency to plunge to a six-week low on Friday

Britain will be on the hook for about €4.2bn but George Osborne is expected to declare victory in extricating the country from any future rescues for the single currency bloc. He will join the eurogroup finance ministers in Brussels on Monday as they put the finishing touches to the future European Stability Mechanism, which comes into effect in 2013. The UK will not be part of the scheme. The announcement will be seen as a victory for the Chancellor and Prime Minister, who have fought to remove Britain from the eurozone's woes. Alistair Darling, when Chancellor, pledged €8bn of UK taxpayer money to the eurozone's €60bn rescue fund in dying days of the Labour administration.

Mr Osborne will also reiterate that Britain will not be part of a second European rescue package for Greece. Confirmation came last week from Christine Lagarde, the French finance minister, who said: "The way went we about Greece last time on this bail-out package was on a bilateral basis, where each member of the eurozone went to bilateral arrangements because we didn't have any mechanism in place.

"And the consideration at the moment is to extend those, if it was necessary, and clearly the UK was not party to those bilateral arrangements."

Greece is expected to receive a second rescue of up to €60bn, though no final decision will be made for a number of weeks. At that level, and following the structure of the first bail-out, the UK will be on the hook for another €700m through its 4.5pc stake in the International Monetary Fund.

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Including the Greek and Irish bail-outs, the UK will be on the hook for a total of about €12.5bn once the Portuguese deal is ratified. The money is only at risk if a country defaults. Britain has pledged about €7bn to Ireland, €4.2bn to Portugal, and €1.3bn to Greece.

Portugal is also expected to be forced to sign up to punishing fiscal consolidation plans, despite caretaker Prime Minister Jose Socrates' claim this month that he had secured more lenient terms than Ireland and Greece. Tough reforms, such as improving labour market flexibility and recapitalising its banks, will be demanded alongside new austerity measures as a condition of the bail-out.

Portugal would now need to cut its budget deficit from 7.3pc to 5.9pc of GDP this year, compared with a previous goal of 4.6pc. The deficit will have to be cut to 4.5pc in 2012 and 3pc in 2013.

Concerns that debt woes could spread from Greece and Portugal to other countries in the eurozone prompted the European single currency to plunge to a six-week low on Friday.

"The overall prevailing theme is the European debt market mood, and the euro has been caught up in that this week," Nick Bennenbroek, head of currency strategy at Wells Fargo in New York, said. "There's been a role reversal in the context of recent events; the short-term inclination of the markets, instead of being to sell the dollar, is to sell the euro."

A global poll of almost 1,300 investors last week by Bloomberg indicated that the market believes a sovereign default by a euro-area nation is more likely than not.

A total of 85pc said they thought that Greece would eventual default on its debt obligations, with more than half indicating that Portugal and Ireland would ultimately default as well.

Data released on Friday confirmed that Portugal had slipped into a double-dip recession, after GDP in the first quarter shrank by 0.7pc. The country's economy grew by 1.4pc last year, but it shrank by 0.6pc in the final quarter of the year. Portugal's Statistics Institute said the contraction was largely due to lower private and public spending.